In today’s challenging business environment, customers demand more from the products and services they buy—they want what they want, when and how they want it. And if they do not get it from you, they can and will obtain it from one of your competitors. Therefore, creating raving fans—customers who love what you do and are willing to follow, listen and respond to your call(s) to action —can give you a significant strategic advantage and improve your bottom line.
Now some of you may be wondering “what does Lady GaGa have to do with best business and branding tactics?” She’s never attended business school nor does she have a history of entrepreneurship. While it is easy to question her outlandish costumes, her repetitive child-like lyrics, and her over-the-top media stunts, it is hard to ignore her obvious musical talent and her ability to be at the right place at the right time with the right tune. Whether you love or hate her (and 99% of you are definitely in one camp or another), it is difficult to ignore the tremendous achievements (and raving fans) of this branding genius.
Less than a few years ago, she was virtually unknown – and today she has two platinum selling albums and is the envy of artists that have been in the business for decades.
How did she do it?
Think about it… in an industry cluttered with talented artists and interesting material, somehow SHE has managed to rise above almost everyone else and command our undivided attention. From her meteoric rise, we can glean 7 simple, yet powerful secrets that any business can use to create raving fans and dominate their market niche.
Secret # 1: Be Memorable
Every newspaper, radio station and TV program in the world reported and talked about the “meat dress” that Lady GaGa wore to the 2010 MTV Music awards.
To be frank, it was so bizarre and scandalous, you could not help but notice her.
Similarly, in business, it’s all about grabbing attention – about creating anticipation, capturing awareness and making customers notice your products and services. The aim is to inspire customers and potential clients stop in their tracks and pay attention to your offer, service, product, or information. In order to achieve this, you need to ask yourself what it is [exactly] about your offering (tangible or intangible) that will capture attention?
If you’re not truly memorable in business, it means you will have to work harder to get the sale. And every time you have to work harder, it costs you time and money.
Case in point – does anybody even remember (or care) what Myley Cyrus or Britney Spears wore to the MTV awards?
No. That is exactly my point – the # 1 secret to creating raving fans is to be memorable.
Secret # 2: Repeat Repeat Repeat
Lady Gaga has got some really interesting songs but when you actually look at the lyrics — they are incredibly child-like and simple. In fact, she often repeats the same words or sounds over and over again.
“Rah, rah, ah, ah, ah
Roma, roma, ma
Gaga, ooh la la
Want your bad romance
I want your ugly, I want your disease
I want your everything as long as it’s free
I want your love
Love, love, love, I want your love”
Ok Gaga, we get it already, you want our love. And love [to her] likely means HUGE album sales or — money, money, money! After all, didn’t ABBA teach us in the 80’s that it’s a rich man’s world?
So we all know that repetition works in music but why is it so powerful in business?
Each and every day, your target audience would be bombarded with hundreds of thousands of marketing messages. In order to create cut through and present a clear and coherent brand message, your message has to be the same every single time someone experiences it. To be effective, you cannot afford to be all things to all people. In this case, you actually want to be a broken record – “ tell them what you are going to tell them; then, tell it them, and finally tell them what you have told them.”
Once you have determined what your unique message is, the key is to repeat it over and over and over again – in your telephone greeting, brochures, business cards, website, Twitter account, Facebook page, Linkedin profile, press releases, thank you cards, customer feedback surveys etc.
Rarely will a customer act on your message the first time he/she sees it. If you want to earn their love, their business and create raving fans, you need to ask over and over again.
Secret # 3: Cultivate Excellence
If what you do is “just ok”, you might as well forget about being truly successful. Technical competence is the cornerstone of every thriving business.
Even Lady GaGa – as strange as she may seem – is a technical genius in her area. At the age of 4 she learned to play the piano by ear. By age 14, she’d written her first ballad and played at open mike nights in various New York clubs. At the age 20 (long before her own debut album was released) she had already written songs for many other well known artists.
Think about the most successful businesses and brand names in the World – Apple, Microsoft, Toyota, Proctor and Gamble, GE and 3M – they ALL place a huge emphasis on technical expertise and acumen. When what you do is superior to your competitors in terms of quality, service, aesthetics and durability, customers and raving fans will flock to your business and price will not be the determining factor in their decision to purchase from you.
Secret # 4: Encourage Fanatics
Lady GaGa initially focused on and won over the gay community and turned them into brand evangelists. Her music has now gained mass appeal with people of all ages and all walks of like.
Her strategy mirrored that of another well known brand icon that most people are very familiar with – Apple. If you think back a few years, Apple was very specific about who they were targeting – graphic designers, technical specialists, the music industry etc. Few people outside this narrow scope even considered owning one because it was thought to be more difficult than a PC to operate (for the average person). Now with the domination of other Apple products like the iPhone, iTunes, iPad and the iPod, almost every one of us has bought or used something that Apple produces.
If you want your business to be successful and endure the test of time, you will need to choose your demographic wisely and cultivate their fanaticism vigilantly.
Secret # 5: Focus
Are you clear about HOW your product/service makes life better for your customer?
It’s not enough to focus on being the #1 provider of this or that or the largest producer of X or Y. Success is less about size and more about companies who put the needs of their customers first. Focus first on what you can be best in the world at doing and then second on how you can deliver that world class product or service to your clients. There’s no point being bigger if what you do just isn’t that great in the first place.
As strange and outlandish as Lady GaGa is, it’s pretty clear what her focus is – delivering catching dance tunes and simple, memorable melodies. There is no tricky math here – she’s not trying to deliver deeply profound political statements or become the world’s most prolific artist. She’s just trying to do one thing – to be memorable and infectious — and she does that one thing very well.
Secret # 6: Package wisely
I have no idea how much time and effort would be spent producing the tracks that Lady GaGa releases but I would hazard a guess that almost as much is invested in developing her elaborate costumes. We all know that in life, “size matters”: In business, “packaging matters”. In fact some brands have such distinctive packaging, that they have changed the way that the entire industry displays its wares.
Think about how McDonald’s switched from Styrofoam boxes to plain wrap paper back in the early 90’s and the rest of the industry followed suit. What about the clean, vivid, minimalistic and colourful packaging of Apple? Haven’t many electronics competitors tried to mimic that highly compelling look and feel?
When is the last time that you took a step back and really looked at your packaging? Does it present your goods and services in the best light possible? If you changed its fit, shape, size, colour, directness or ease of use, could it make it easier for your customers and lift sales?
Secret # 7: Be Relentless
There are very few one-hit wonders in the music industry.
However, the world is littered with businesses that have had initial success with a product/service and then failed to do much of anything else. The advent of the internet and global trading has meant that competition is fierce in most industries and the market is inundated with new products and innovations. In order to be successful, businesses must constantly improve what they do and move forward, not only to thrive, but also to survive. To do this, you need to constantly ask yourself “what do we need to do today in order to WOW our customers and maintain their loyalty?” You need to create raving fans.
Lady GaGa does continuous improvement better than anyone. Just when one of her hits starts to taper off, she is quick to introduce us to another song that we just can’t seem to get out of our heads. In order to keep her name and brand on our minds, she carefully and consistently plans to release a new song every three to four months.
Let’s be frank, I doubt Lady Gaga will ever be invited to lecture at an Ivy League school on business success but these 7 secrets – that she does better than almost anyone else – apply to any and all businesses looking to create raving fans and be successful in today’s highly challenging and demanding marketplace.
John Wannamaker may not be a household name but he opened the first department store in Philadelphia in the late 1800’s and is believed to be the inventor of the price tag and the seasonal sale. He was the first retailer to place a half-page newspaper ad, and also the first full-page ad five years later. He is widely considered to be one of the fore-fathers of advertising and credited with the famous phrase: “Half the money I spend on advertising is wasted; the trouble is, I don’t know which half.”
His words survive as one of the most frequently quoted clichés in marketing and advertising, even after radio, TV and now the internet, have replaced the dominance of print advertising.
Why with all we’ve accomplished in the last one hundred and twenty years, is this quote still relevant and significant to you (and to all marketers) today?
In fact how do you know you’re not throwing away 2/3 of your advertising budget? Or perhaps even as much as 3/4?
How can you be sure that your next campaign, sitting on your desk waiting for your approval, won’t be an abysmal failure – sucking your bank account dry and producing no measurable influx of qualified leads and sales?
Do you know with certainty which half of your advertising budget is wasted? Want if you needed to find out?
Right now, your audience is getting harder to reach in all the traditional media channels, and the rules of marketing have changed. Print newspaper readership, radio listeners and even TV viewers are down. Consumers have adapted to new technologies – the internet, iTunes, podcasts, downloads – and can now comfortably avoid unwanted advertising in many of these old channels.
Many of the old ways are being replaced by new ones. The internet, content marketing, video and social media have emerged as the new, dominant players. To succeed in this new realm of advertising, requires a shift in both mindset and strategy.
You used to be able to get away with talking at your prospects (or having one-way conversations), now you must respond to their comments (positive and negative) in real time.
Where five years ago you could simply focus on spending less to find more local prospects, now you must excel at “being found” in a sea of global competitors.
Thankfully, these new mediums bring with them two significant benefits – targeting and measurability. Finally, improving your odds of determining which half of your advertising budget is wasted, is not only possible, but refreshingly do-able. You simply have to know which tips and tools to use to maximize your return on investment (ROI).
Here are five practical tips for developing an effective measurement strategy for your online and offline marketing communications – (and for determining which half of your advertising budget is wasted):
1) Monitor all incoming leads
Where possible, place a unique phone number (or email address) in different media placements to gauge which ad creative, copy, design elements or physical placement garners the most qualified traffic and sales. Each unique number or email address can easily be re-routed to your primary incoming line or email, so you can streamline the process of receiving and replying to these valuable enquiries. To minimize confusion with your target audience, try to refrain from using too many different numbers at once.
For some brands, that are highly identifiable and use a memorable phone number, tracking may not be viable. As an alternative, try recording the inbound calls and use the insights to train your sales team. While it may cost more, the recorded conversations will provide significant insight into the interest level, FAQ’s, objections and pain/issues of your prospects.
2) Use Split Testing
When you see a banner, video, text or display ad online, it has been sent to your computer or mobile device from an ad server. In most cases, what this means is that the advertiser will have been given the opportunity to split test their ads – to change their online creative in real time to monitor impressions, clicks, engagement and conversions. Essentially some of the audience will see one version of the ad, while others may see different versions.
But split testing doesn’t just apply to online ads and websites. In fact it can be used effectively with any online or offline marketing piece to test different creative, copy, or calls to action. It allows your audience to tell you in tangible terms which messages they prefer and are inclined to respond to favourably.
3) Set Up Specific Landing Pages
Most small business owners will make the mistake of wasting a lot of money on ads to send traffic direct to their homepage. More often than not, 90% of this traffic will bounce off your website within seconds because the content they are interested in is either not featured prominently on the homepage or is just too hard to find. In order to maximize the engagement of your traffic and your ROI, you need to ensure that you are taking your leads to pages where the specific content and offer you are advertising is the ONLY information presented.
The easiest way to do this is to set up landing (or private) pages on your site with unique URLs for each offer. The landing page will give each user a more customized experience and it will allow you to set the stage for an inquiry, call to action or sale.
These landing pages are also extremely effective for allowing you to track and measure ROI from both online and offline ads – when a prospect converts, you can directly attribute that conversion to a specific marketing piece because the landing page URL is unique for each one. Where possible, remember to use a user-friendly URL (one that is short, relevant and easy to remember) to drive traffic from offline media – it will boost retention, recall and action by up to ten times.
4) Google Analytics
Google Analytics is an invaluable tool that can help you measure what is working and what isn’t on your website. However, just like the human brain, most site owners haven’t fully tapped into the full potential and power of it. In addition to telling you where your traffic is coming from and which search terms or links were used to find you, Google Analytics also measures where users click most on a given page, how long they spent on your site and where they go when they navigate away from your page. Google analytics can provide you with enough data to isolate and eliminate marketing that’s not generating profitable growth.
Research indicates that the average conversion rate for a website is between 2.2 – 4%. What this means is that 96-97.8% of the visitors that came to your site today, left without taking any action. They key to minimizing the leakage and maximizing the percentage that remember your message and take action lies in analysing the data that Google can provide on your website traffic and trends. It doesn’t make sense to spend more money on marketing if a large percentage of your audience is choosing not to take action.
5) Stop Chasing Clicks and Eyeballs
A click (or eyeball viewing your offline ad) means nothing to your business. It earns no revenue and creates no brand equity. Your advertising has to have a tangible end goal – and it shouldn’t be to reach the most eyeballs or generate lots of clicks. To have a successful business, you need people to discover how you can cure their pain, seek more information, join your list, or purchase your product/service. Success lies not in how many people know what you do but rather in how many you are able to connect with and inspire to say “yes” to your product/service.
For those of you who are in the retail industry, you may have noticed a recent trend to clean up in-store environments – reduce shelf heights, remove dense ends and dump bins, widen aisles etc. – in order to increase comfort and make the shopping experience less stressful for customers.
The big question then becomes “does clean make customers keen”? According to Walmart, arguably the largest and most successful retailer in the world, clean stores mean fewer beans (on the bottom line).
As reported in the New York Times, Walmart conducted a massive in-store experiment to improve sight-lines, rationalize the overall number of items offered, remove warehouse-like merchandising in centre aisles, and increase the width of core aisles. According to Walmart’s CEO William S. Simon, “(Customers) loved the experience. They just bought less.”
As a result, Walmart reverted back to its original strategy of offering more products, with tighter aisles, more clutter and lots of bargain bins in the hopes that customers would spend more because of a perception “there were bargains to be had”.
If you do a quick search on the internet, there are dozens of experts who subscribe to the view that a larger selection, more bargain bins, and sales signage equates to “better value”. In essence, the more you look like a market stall, the better it is to generate buzz and sales. They argue that if your merchandise is neatly presented on the walls and in well organized aisles, with no point of sale impulse offers and dense ends full of 2-for-1 specials, customers will tend to think your store is expensive (i.e. overpriced) and they will not buy from you.
And if you think about it, you can probably name a whole list of retailers who subscribe to this “clutter is good for business” philosophy and they seem to be successful. But how can we be sure that clutter makes customers keen? Have we been too quick and prematurely jumped to a conclusion that clean is a traffic and transaction turn-off?
Recent empirical evidence from neuroscience and neuromarketing sheds new light on how we think, and more importantly, how we make decisions. In fact, the decision making part of your brain responds strongly to certain stimuli only.
Did you know that your brain consumes 25% of your body’s energy? As a result, you brain wants to conserve energy so you tend to pay attention and be attracted to things that have sharp contrast, high visual appeal, strong emotional cues and a clear beginning vs. end message.
Now what does this mean for you in the context of your shopping environment?
A chaotic, cluttered store is cumbersome for your brain to navigate – you have to work hard mentally to hunt down and search for bargains. It may create some emotional appeal but it is likely perceived as having low contrast, low visual appeal and no clear beginning vs. end. According to neuromarketing studies, shopping in this environment takes time and energy and it also forces your brain to go into “thinking” mode. This is a critical point because thinking is counter-productive to deciding. Thinking takes place in one part of your brain (the neo-cortex), while deciding happens much more quickly (and automatically) in your old or “reptilian” brain.
So what does this neuromarketing research mean for the strategy and conclusions reached by Walmart?
Based on neuroscience, the strongest buying cue that you can give your customers is this – if your store (or business) has incredible bargains, people will buy (and even sift through a maze of clutter) because something is in it for them. The “what’s in it for me” (WIFM) principle is one of the strongest influences on the part of your brain that decides.
However, there is no hard evidence to suggest that clutter makes your customers keen.
Walmart and many others have come to a conclusion based on what they THINK people are doing to reach a buying decision in-store. However, neuromarketing has produced empirical evidence to support the opposite conclusion is more probable. Clutter and chaos create an environment where your customers have to think too hard, which is exhausting for the brain. They will do it if they have to, as long as the perceived bargains and value are very high.
Wouldn’t it make more sense to find another way to communicate good value and service without exhausting your customers and causing them to waste their time?
Wouldn’t you be more likely to get more sales and word of mouth referrals from your delighted customers?
In the end, Walmart may be correct about the fact people buy more in certain circumstances but they are wrong about WHY that is. The best way to create more excitement and sales is to make it easier for your customers to decide. You need to show them what’s in it for them, increase the contrast between your solution and your competitors and communicate a strong, clean visual message that compels them to say “YES”.
If you had to pick 1 thing – 1 strategy or change that you could implement in your business that would allow you thrive despite tough economic times, what would it be?
Let’s make a list of the top 5 things that I hear most business owners (like you) say when I ask them the same question…
- Spend money on marketing – attract new customers
- Have a sale
- Ask for referrals or help
- Tighten your belt – cut costs
- Do more networking
Now what do all of these have in common?
They all involve you doing more of the same thing that you have always done. None of these involve a radical shift in the way that you do business, do they? None of these involve you taking a step back and re-examining what you do and whether it’s actually working. And none of these involve you changing the way that you communicate what you do to your customers.
And that is precisely why none of them will work to recession proof your business.
So why is that important?
Because consumer sentiment and spending has changed dramatically in the past few years and those changes are being felt across every industry and by both big and small businesses. Everything you thought you knew about your customer and why she was buying from you has probably changed. And if you don’t take the time now to re-discover your prospect’s main source of pain – the reason why she needs your product or service – you risk losing more sales and more ground to your competition.
Now some of you are probably sitting there thinking “but MY industry is different. You may think that you’ve been hit especially hard and that everyone in your niche has lost sales. But that’s not the case for 99% of you. Even some of the most competitive and vulnerable industries have companies who have continued to perform well and who have even stole market share.
Just for a moment, I want you to cast your mind back to the first few months after the GFC. A lot of people lost their life savings during the stock market crash and many lost their jobs immediately after that. It was a horrific few months and few industries felt the wrath of the crash more so than the automotive sector. If you remember, new car sales dropped by almost 20% in a short period of time and stayed that way for almost a year. That’s a huge drop in an industry that is vital to the health of the national economy.
Now sales of new cars were down 20% for the industry. Despite the massive drop in sales, 1 manufacturer actually managed to gain market share and outperform all other companies in sales growth. Do you remember who that was and why?
Only 1 company stopped and took a good hard look at the pain their customers were in at the time. They didn’t do what all the others did – which was spend more money on newspaper ads, lay off salespeople and slash new car prices.
Only 1 company examined the change in the market, correctly diagnosed the pain of their prospects and came up with a solution. “If you lose your job and can’t make the payments, no problem – we will take it back free of charge”.
Do you remember who that was? That’s right Hyundai.
With one simple change to their focus and strategy they stole market share from every other manufacturer because they correctly identified the shift in their customer’s pain. They didn’t keep going on with the same old strategy and approach that clearly wasn’t working. Yes, there had been a major downturn and the whole industry was hit hard, but there were still lots of customers who wanted to buy a new car but were afraid to do so because they might lose their jobs.
So how can you apply this to your market right now? First and foremost, your customers are not thinking about you, your brand and your features and benefits – they are thinking about their own survival and whether or not you can cure their pain. If you are able to correctly diagnose the pain, you will trigger the part of their brain that makes decisions and you will stand apart from your competition. That’s the power of Sales Seduction.
Think about one of your customers right now and her pain? What do you need to do in order to get more clarity around that? What questions do you need to ask her about how it is affecting her financially, personally and strategically? To the extent you can diagnose her pain, get her to acknowledge it and put forward the solution that cures it, she will listen to anything that you have to say.
Take a look around you… businesses are closing their doors everyday – which means more potential customers for the businesses like you that DO survive. And in times like these, it’s going to take more than just doing more of what you have always done to recession proof your business. Uncertain times call for deliberate decisions and proven practices. In order to recession proof your business you need to shift your thinking around the way you do business and start providing THE solution to the #1 pain or challenge that your customers have. And if you need some diagnoistic questions and a step-by-step framework to help you do this…I highly recommend that you check out Chapter 8 of Sales Seduction.
It has often been said that “profit is pointless and cash flow is King”. But do you know why?
It is possible for a business to show a profit for a period of time, yet have negative cash flow. In fact, businesses that have profit (on paper) go under every single day. Negative cash flow, if sustained for an extended period of time, will eventually cause the company to run out of money and cease operations. Therefore, knowing the cash flow position is critical to staying afloat and knowing how to unlock more cash flow is imperative to effectively coach a business owner or senior executive.
Are You Chasing The Wrong Target?
You can have the most brilliant product or service but if the business runs out of cash, it won’t matter. Most businesses make the fatal mistake of thinking that they simply need more customers. If only they had more customers, they would have more sales and more profit…and they would be more successful.
But is this true?
Can businesses simply advertise their way into more sales and better results? No. In fact, advertising and discounting often have a negative impact on the bottom line and cash flow.Simply put – the initial instinct most coaches and business owners have is to focus on increasing sales. Employing this strategy in a business coaching context – chasing customers and sales – is often the worst thing you can do for the business.
The common assumption is that if you are running a business (or involved in business coaching) where the price you charge for your products is greater than what they cost, everything will be okay: you will be profitable and successful. Profit is good – don’t get me wrong – but it is simply not enough on its own. To be sustainable, the business must also have a healthy cash flow.
If you are like most coaches and business owners, you never dreamed that the ability to understand how money flows in and out would be incredibly important. You thought: “That’s for the accountant or finance department to worry about. Sure, they may show me a few reports from time to time, but I don’t see the need to really understand what the numbers mean. If there was a problem, they would tell me, wouldn’t they?”
You probably didn’t realise that all those numbers – the financial DNA of the business – can tell you a lot more than you thought. They can tell you why the business is not growing or is struggling to meet targets. They can reveal why there is less money in the bank account [again] than there was last month.
The financial numbers ARE the story of the business. Numbers don’t lie. They are one of the few objective indicators of how a business is performing and where the problems are. Ironically, financials are the most overlooked area of business coaching with the majority of practitioners choosing to specialize in leadership, sales or marketing disciplines. Unfortunately, without a solid understanding of financials, it is impossible to coach effectively and produce predictable results.
Regardless of any justifications you (or your business coaching clients) use to explain why the business is not performing – the economy, the shortage of ‘good’ staff, competition, supply chain issues etc. – the numbers tell the truth and can lead you to the solution. You just need to learn HOW to use them to your advantage.
You need a bit of Financial Foreplay®.
Are You Avoiding The Numbers?
When is the last time you took two hours out of your week to analyze the financial statements of a client or your own business? Can you honestly say that you know exactly where you (or they) are at and WHY? Do you sometimes wonder what the numbers are trying to tell you? Are you guilty of wasting money chasing new leads and sales instead of fixing the business and making it more profitable?
Most business coaches and business owners make the mistake of assuming they can improve the business by examining the Profit and Loss and Balance Sheet on a monthly basis. Unfortunately, these statements only tell part of the story. In fact, you cannot measure the cash flow position of a business by looking at the bank balance or examining the financial statements at a specific point in time.
This is because most businesses use what’s called ‘accrual’ accounting. Rather than recording ‘money spent’, they record spending as ‘money spent plus money committed to be spent’. So if stock has been purchased on account, accrual accounting includes the value of that purchase from the point it is made – not from the point when the account is paid. Accrual accounting takes into account the amount of money that has been spent plus committed to be spent in the future. The same thing happens in reverse with earnings – it includes money received plus money expected to be received. When a sale is invoiced with 30 days to pay, the value of that invoice is included in accrual earnings even though the money won’t be received for at least another 30 days.
Therefore, when accountants talk of ‘profit’, then, they usually mean ‘accrued profit’ as opposed to what we would call ‘real or cash profit’. Accrued profit is the expected real profit after ‘spending already committed to’, and ‘earnings expected to be received’, are
taken into account along with real (cash) spending and real (cash) earnings. As a result, the profit showing on an Income (or Profit and Loss) statement is a more complicated and less useful representation of the current financial situation of a business. Net profit cannot be relied upon in isolation to gauge the financial health of a company.
Stated another way, cash flow must be tracked over a period of time and can be measured by the following calculation:
Net profit (year to date)
+/- changes in inventory
+/- changes in accounts receivable
+/- changes in accounts payable and GST and
+/- changes in fixed assets
= Cash Flow
Changes in these 4 items on the Balance Sheet have a significant impact on the cash flow and viability of a business. That is why getting inventory levels right, optimizing receivables and payables and investing only in assets that generate a return, is critical when coaching a business of any size. In fact, a coach can often have more tangible impact and influence on a business by focusing on these 4 areas than on directing effort towards gaining new customers and increasing sales. And oftentimes, it costs the business very little to implement highly effective strategies in these 4 areas.
In practice, it is vital to have an eye on both real profit (cash flow position) as well as accrued profit. It is a common error to focus solely on accrued profit – an error which has the potential to send a business to the wall prematurely.
Are You Sure It’s Profitable?
Profitable growth should be the goal of any business. However, you cannot achieve profitable growth without first establishing that the business is in fact profitable. Attracting more leads or closing more sales may not be enough – the costs and efficiencies in a business change every day and this means that we must constantly monitor and measure results and take appropriate action. Focusing solely on customers and sales is a bit like spending 100% of your time practicing your tennis serve while neglecting to watch the scoreboard, analyze the strategy of competitors and practice your returns.
Break-even is one of the most simple and powerful calculations that you can use yourself and with your clients each month to measure and enhance profitability. A company is said to “break-even” for a period (usually a month) when its sales revenue catches up to its costs. Specifically, accountants talk about break-even as the point where ‘fixed costs’ (rent, salaries, etc.) are matched by ‘gross profit margin’ (sales revenue minus COGS).
Therefore, it follows that break-even with profit is the point in the month where the business covers all of the fixed and variable costs and starts making the desired profit target. Remember, if you and your clients are in business and not running a charity, the goal is profitable growth. In order to achieve profit, you MUST in fact plan to achieve it.
Calculating break-even (and break-even with profit) each month and knowing specifically which day of the month the business breaks-even, allows management to make informed, strategic decisions about how to achieve growth that is profitable for the bottom line and enhances the cash flow position.
Are You Ready To Get Results?
Knowing where the financial pain is when you are coaching a business allows you to focus your time and resources where they will make the greatest impact on the bottom line. And if you are truly serious about being a successful business coach, and it is not just a hobby or a way to pass the time, you will find a way to fit a bit of Financial Foreplay® into your day so that you can help others to whip their businesses into shape and start taking home more cash! It’s the quickest and most effective way to get your clients working ON not just IN their businesses.